| What do Markets do? How does this Work? | -Markets try and Allocate Resources.
-Buyers and Sellers in a Market will try to Exchange something they'd prefer to have. Labour can be Exchanged for a Salary |
| If Markets are considering that Everyone is Rational, what can be Assumed? | -Worker would prefer to have More Wages, but less Free Time
-Employers would Prefer to have Less Money, and know someone is there to do the Work |
| What is a Free Market? | -Free Markets are when Resources are Allocated via Supply and Demand, and the Price Mechanism
-Anything will be Sold at Any Price that people will Pay for it
-No Public Sectors would be Present |
| What are the Advantages of Free Markets? | -Any Product being able to be Bought and Sold can mean only the Best Value will be Demanded. Therefore Firms must Incentivise to make Goods Efficiently and Quality
-Good Ideas, like making Better Products or Efficiency, is Rewarded through a Lot of Money.
-Incentives from Innovation [that come from how Good Ideas can be Handsomely Rewarded] can mean a Greater Choice for Consumers. Not Restricted to buying Gov Recommendation |
| What are the Flaws of Free Markets? | -Market Economies can create Huge Inequality in Income. Can be seen as Unfair as people Unable to work would get 0 Income
-Non-Profitable Goods may not be made as Firms may not be able to get a Profit: Little Incentive
-Some Successful Firms can create a Monopoly and be the Only Supplier of the Product: can be Abused |
| What is a Command Economy? | -Governments decide on How the Resources are Dished out.
-Was seen in the Soviet Union, and is in North Korea
-No Private Sector would be seen |
| What are the Advantages of a Command Economy? | -Inequality and Distribution of Income can be made very Fair and Equal. Also means the Production of Goods that are Needed and Benefits Society
-Unemployment can be made Low as the Government can Provide all with a Job and Salary
-No Monopolies being set up as the Government allocates the Resources, so can Dictate really who Supplies the Product |
| What are the Flaws of a Command Economy? | -Lack of Information can lead to Bad and Slow Decisions about what needs to be Produced
-Consumers will have less of a Choice as Firms are being told what to Make
-Gov owned Firms have no Incentive to Improve Efficiency, Take Risks, or Innovate as they don't get any Reward [Profit] |
| What are Market Failures? How may the Government Intervene? | -Market Failure is when Free Markets leads to Unwanted Outcomes [Over or Under Produced/Consumed]
-Governments may change the Law, offer Tax Breaks, Create Incentives to change Behaviour or Providing and Subsidising Goods and Services |
| What is a Mixed Economy? | -When the Government and the Market Intervene to Allocate Resources |
| What is the Public and Private Sector? | -The Public Sector is basically the Government
-The Private Sector as Firms that aren't owned by the Government but by Individuals. |
| What did Adam Smith Say and Believe In?
1723-->1790 | -Shaping the Traditonal Economic Theory, Smith believed in the Free Market and how the 'Invisible Hand' would Allocate Resources in the Best Way Possibly
-Reasoning was how Consumers and Firms are thinking about how to Maximise their Own Benefits and Profit. In the Free Market, the Consumers Demand, and Firms Supply, will lead to a Price that Satisfy both Parties.
-Monopiles can't Exist, and Low Barriers should be made to Maximise Competition [as Innovation and Efficiency Skyrocket]
-Smith also Mentioned Specialisation and Division of Labour |
| What did Karl Max Say and Believe In?
1818-1883 | -Criticising the Free Market, saying a Small Ruling Producers had Dominance over the Working Class [Bourgeoisie vs Proletariat]
-Profit Maximisation Behaviour would Exploit Workers [Low Wages ie] until a Revolution took place. This would lead to the Proletariats Controlling in the Ownership of Resources
-Marx led to Communism rising, but Marx didn't say much about Command Economies. |
| What did Friedrich Hayek Support and Believe In?
1899-1992 | -Supporter of Free Market; Nay to Command Eco.
-Argued that Govs should not Intervene to Allocate as Govs don't have the Information to Allocate in a way to Benefit Society Greatest, but Rather Consumers and Firms have Best Knowledge on their Needs and Wants, so it should be left to Them
-Hayek saw the Pricing Mechanism a way to 'Communicate' - Price Level set by Supply & Demand showing what Consumers and Firms Want, and therefore will Naturally Allocate Resources Better |
